GMM estimation of linear panel data models with time-varying individual effects

Seung Ahn, Young Hoon Lee, Peter Schmidt

Research output: Contribution to journalArticle

87 Citations (Scopus)

Abstract

This paper considers models for panel data in which the individual effects vary overtime. The temporal pattern of variation is arbitrary, but it is the same for all individuals. The model thus allows one to control for time-varying unobservables that are faced by all individuals (e.g., macro-economic events) and to which individuals may respond differently. A generalized within estimator is consistent under strong assumptions on the errors, but it is dominated by a generalized method of moments estimator. This is perhaps surprising, because the generalized within estimator is the MLE under normality. The efficiency gains from imposing second-moment error assumptions are evaluated; they are substantial when the regressors and effects are weakly correlated.

Original languageEnglish (US)
Pages (from-to)219-255
Number of pages37
JournalJournal of Econometrics
Volume101
Issue number2
DOIs
StatePublished - Apr 2001

Fingerprint

Panel Data
Data Model
Time-varying
Estimator
Generalized Method of Moments
Moment Estimator
Macroeconomics
Normality
Vary
Moment
Arbitrary
Model
Individual effects
GMM estimation
Panel data
Efficiency gains
Generalized method of moments estimator
Overtime

Keywords

  • Generalized method of moments
  • MLE
  • Panel data
  • Time-varying effects

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Statistics and Probability

Cite this

GMM estimation of linear panel data models with time-varying individual effects. / Ahn, Seung; Lee, Young Hoon; Schmidt, Peter.

In: Journal of Econometrics, Vol. 101, No. 2, 04.2001, p. 219-255.

Research output: Contribution to journalArticle

Ahn, Seung ; Lee, Young Hoon ; Schmidt, Peter. / GMM estimation of linear panel data models with time-varying individual effects. In: Journal of Econometrics. 2001 ; Vol. 101, No. 2. pp. 219-255.
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